The freight transportation industry is a crucial element in the flow of international and domestic trade. In 2006, there were over 26 million trucks on the road in the United States alone. The smallest of operational inefficiencies can quickly amount to billions of dollars of lost profits, lost driver income, and added costs to the consumers. The trucking industry continually strives to identify and implement new approaches that can lead to efficiencies, and in turn, increase profits, decrease costs, and increase consumer savings.
The current state of practice in freight transportation may involve the following three common entities: Shippers, Carriers and Drivers, whose common roles are delineated below: Shipper—Consignor, exporter or seller named in the contract as a party responsible for initiating the shipment and may also bear the shipping costs. Carrier Company that transports goods and/or people by air, land or sea, in its own or chartered vessels or equipment, as is named as the carrier in the contract. Driver—Person responsible for operating the vehicle used to ship the goods, usually employee of the Carriers or private contractor. There are many variations of the interactions, provisions, scale of resources, and responsibilities that can and may occur among some or all of these aforementioned entities in the movement of goods.
Typically, a commercial vehicle owner (CMV) is operating multiple vehicles and may be an owner who does not drive his own vehicle. In the U.S., trucks and drivers may be paired up along the various operating models, for example: 1) a commercial vehicle owner (CMV) owns at least one truck and at least one trailer and may himself be the driver or he contractually pairs up with an employee driver; 2) a CMV owns at least one truck and at least one trailer and contractually pairs up with an independent contractor driver; or 3) a CMV owns a truck and/or a trailer and that equipment is paired with other trucks, trailers, and/or drivers. In many cases a CMV is a carrier and, as outlined above, the carrier may fall within any of the three CMV categories and can range in scale from very small to very large in terms of controlled trucks, trailers, and/or drivers. They may own their own fleet and may also hire their own drivers directly. However, they still may fall within the third aforementioned category where resource needs for trucks, trailers, and/or drivers may extend beyond their own available resources.
It is important to note, though, that a carrier is not always the CMV in a freight shipment transport need. In some cases, a CMV is the shipper themselves that may own their own fleet, and may also hire their own drivers directly. The shipper can range in scale from very small to very large. However, they still may fall within the third aforementioned category where resource needs for trucks, trailers, and/or drivers may extend beyond their own available resources. In these cases, the shipper may choose to leverage external resources (i.e. working with a carrier) for trucks, trailers, and/or drivers to fulfill demand beyond their owned resources.
Factors such as increasing operating costs, tough market competition, driver shortage and stricter regulations have added further economic pressure on CMVs. More frequently, the increased costs in the industry are causing wage pressure on commercial drivers and holders of commercial driving licenses (CDL). Primary vehicle owners, shippers/manufacturers and transportation companies, are pushing for ever leaner operations, while the state and federal agencies overseeing the freight transportation industry are struggling to enforce regulations to maintain safety and address environmental concerns.
One reason for all the above issues is the inefficiencies that exist within the freight transportation system. A great challenge in the industry is addressing the issue of asset under-utilization due to, for example, driver downtime, empty backhauls, and vehicle downtime. There are a number of reasons for the failure to efficiently use the existing capacity, for example: (a) an occasional need for greater capacity causes shippers/manufacturers and commercial operators to buy excess transportation capacity; (b) variations in schedule and destinations traveled create non-matched transportation needs; (c) lack of knowledge of trusted users who could conveniently use this excess capacity; and (d) difficulty in providing an economic benefit to incentivize the vehicle owners to share their excess capacity.
In the United States, commercial motor vehicle drivers (CDL) have driving time, and therefore distance, limitations placed on them for safety reasons. Safety concerns include both the CDL drivers and other drivers on the roads. The rules limit the number of daily and weekly hours spent driving and working, and regulate the minimum amount of time drivers must spend resting between driving shifts. CDL drivers are limited to 11 cumulative hours of driving in a 14-hour period, following a rest period of no less than 10 consecutive hours. Based on these limitations, trucking trips are classified as either “short haul” or “long-haul,” depending on the distance and/or time of the route associated with the shipment, and whether the trip is intra-regional or is it national/long distance. Usually, a short-haul trip covers a local area that enables a single driver to leave and return home within a consecutive eleven-hour time span. A long-haul trip does not enable the driver to return home in a single day. Instead, the driver must take a layover break in accordance with the Federal Motor Carrier Safety Administration (FMCSA) (United States Department of Transportation) rules and regulations.
Occasionally, transportation companies buy additional equipment and/or employ additional drivers to comply with those legal requirements. Also, companies may face periodic, e.g., seasonal, spikes in demand in which that additional equipment is used, while it may sit the rest of the time. Shipping schedules can make it difficult to have the right equipment in the right place at the right time, forcing the transport of empty trailers to where they are needed. Sometimes, there is simply no follow-up shipment for backhaul, when the equipment reaches a destination, and an empty truck travel to the next shipment pickup.